Question 1
Fixed cost per unit continuously declines as production increases (within the relevant range). This is called economies of scale.
True
False
Question 2
The coefficient of determination or R squared, in regression analysis, should be less than 0.75 to indicate a strong cost equation.
True
False
Question 3
ABC Co. has fixed costs of $85,000. ABC wants to achieve an after-tax profit of $10,000. The selling price per unit is $100, and the variable cost per unit is $25. The company has a tax rate of 20%. How many units must ABC sell to acheive its after tax target profit goal?
Question 4
Advertising represents a variable cost.
True
False
Question 5
The following is historical costs and usage for electricity costs: Electricity Cost Kilowatt Hours January $1500 2600 February $1200 1800 Using the high/low method, what is the projected fixed cost? Omit dollar signs and commas! |
Question 6
Mixed costs have fixed and variable components.
True
False
Question 7
The relevant range represents where all cost assumptions remain valid.
True
False
Question 8
XYZ Company has fixed costs of $100,000. The selling price per unit is $80 and the variable cost per unit is $40. What is the break even sales dollars?
Omit dollar signs and commas!
Question 9
A step fixed costs represents a fixed cost that varies in direct proportion to the activity level
True
False
Question 10
Total fixed costs change in direct proportion to the level of production.
True
False
Answers
Answer = TRUE; Fixed cost remains same is totality but changes per unit basis.
Answer = FALSE, its not essential
A |
After Tax profit |
$ 10,000.00 |
B = A/(100% - 20%) or A/80% |
Before tax profot would be |
$ 12,500.00 |
C |
Fixed Cost |
$ 85,000.00 |
D = B+C |
Total Contribution margin required |
$ 97,500.00 |
E = 100 - 25 |
Contribution margin per unit |
$ 75.00 |
F = D/E |
No. of units required |
1,300 = Answer |
Question 5 |
Months |
Units |
Cost |
High Level |
Jan |
2,600 |
$ 1,500.00 |
Low Level |
Feb |
1,800 |
$ 1,200.00 |
Difference |
800 |
$ 300.00 |
|
Difference in Cost |
$ 300.00 |
||
Difference in units |
800 |
||
Variable cost per unit |
$ 0.38 |
||
Working |
High Level |
Low Level |
|
A |
Total Cost |
$ 1,500.00 |
$ 1,200.00 |
B |
Total Units |
2600 |
1800 |
C |
Variable cost per unit |
$ 0.38 |
$ 0.38 |
D = B x C |
Total Variable cost |
$ 975.00 |
$ 675.00 |
E = A - D |
Total Fixed Cost |
$ 525.00 |
$ 525.00 |
--Answer: FIXED COST = $ 525.00
TRUE, that’s why they are called MIXED cost.
Answer =True. It assumes that Fixed cost will remain same and variable cost will change with a change in volume.
Answer: = $ 200,000
A |
Fixed Cost |
$ 100,000.00 |
B = 80 - 40 |
Contribution margin per unit |
$ 40.00 |
C = A/B |
Break Even in units |
2,500 |
D = C x $ 80 |
Break Even in Dollars |
$ 200,000.00 |
FALSE. It varies, but not in direct proportion to the activity ;evel.
FALSE. Variable cost does that, Fixed Cost stays the same.
Question 1 Fixed cost per unit continuously declines as production increases (within the relevant range). This...
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